United Nations Environment Programme

Transcription

1 UNITED NATIONS United Nations Environment Programme Distr. GENERAL UNEP/OzL.Pro/ExCom/79/27 14 June 2017 EP ORIGINAL: ENGLISH EXECUTIVE COMMITTEE OF THE MULTILATERAL FUND FOR THE IMPLEMENTATION OF THE MONTREAL PROTOCOL Seventy-ninth Meeting Bangkok, 3-7 July 2017 PROJECT PROPOSALS: ARGENTINA This document consists of the comments and recommendations of the Secretariat on the following project proposals: Phase-out HCFC phase-out management plan (stage I, third and final tranche) Italy/UNIDO/World Bank HCFC phase-out management plan (stage II, first tranche) Italy/UNIDO/World Bank Pre-session documents of the Executive Committee of the Multilateral Fund for the Implementation of the Montreal Protocol are without prejudice to any decision that the Executive Committee might take following issuance of the document.

2 PROJECT EVALUATION SHEET MULTI-YEAR PROJECTS Argentina (I) PROJECT TITLE AGENCY MEETING APPROVED CONTROL MEASURE HCFC phase out plan (Stage I) IBRD, Italy, UNIDO (lead) 66 th 17.5% by 2017 (II) LATEST ARTICLE 7 DATA (Annex C Group l) Year: (ODP tonnes) (III) LATEST COUNTRY PROGRAMME SECTORAL DATA (ODP tonnes) Year: 2016 Chemical Aerosol Foam Fire fighting Refrigeration Solvent Process agent Lab use Total sector consumption Manufacturing Servicing HCFC HCFC HCFC HCFC-141b HCFC-141b in imported preblended polyol HCFC-142b (IV) CONSUMPTION DATA (ODP tonnes) baseline: Starting point for sustained aggregate reductions: CONSUMPTION ELIGIBLE FOR FUNDING (ODP tonnes) Already approved: Remaining: (V) BUSINESS PLAN 2017 UNIDO ODS phase-out (ODP tonnes) 1.29 Funding (US $) 134,000 (VI) PROJECT DATA Total Montreal Protocol consumption limits n/a n/a n/a n/a Maximum allowable consumption (ODP tonnes) Agreed funding (US$) Funds approved by ExCom (US$) Total funds requested for approval at this meeting (US$) n/a n/a n/a n/a IBRD Project costs , ,612 Support costs , ,596 Italy Project costs 300, ,000 Support costs 39, ,000 UNIDO Project costs 8,435, , , ,000 9,560,542 * Approved at the 61 st Executive Committee meeting. Support costs 632, , , , ,843 Project costs 8,735,542* 0 1,600, , ,650,154 Support costs 671, , , ,689 Project costs , ,000 Support costs ,750 8,750 Secretariat's recommendation: Blanket approval 2

3 PROJECT DESCRIPTION 1. On behalf of the Government of Argentina, UNIDO as the lead implementing agency, has submitted to the 79 th meeting a request for funding for the third and final tranche of stage I of the HCFC phase-out management plan (HPMP), at the amount of US $125,000, plus agency support costs of US $8,750 for UNIDO only 1. The submission includes a progress report on the implementation of the second tranche, the verification report on HCFC consumption and the tranche implementation plan for 2017 to Report on HCFC consumption HCFC consumption 2. The Government of Argentina reported a consumption of ODP tonnes of HCFC in 2015 and estimated a consumption of ODP tonnes for The HCFC consumption is shown in Table 1. Table 1. HCFC consumption in Argentina ( Article 7 data) HCFC * Baseline Metric tonnes HCFC-22 6, , , , , ,859.5 HCFC-141b 1, ,031.1 HCFC-142b HCFC HCFC HCFC Total (mt) 8, , , , , ,281.3 ODP tonnes HCFC HCFC-141b HCFC-142b HCFC HCFC HCFC Total (ODP tonnes) *As per the independent verification report. 3. The consumption of HCFC-22 significantly decreased from 2013, primarily because of the conversion of the room air-conditioning (AC) manufacturing sector. HCFC consumption in 2016 was 45 per cent below the baseline for compliance. The low levels of HCFC consumption in recent years have been largely due to a slow-down of the economy, as well as exchange-rate control measures that have prevented some importers from fulfilling their entire quota. These circumstances, which are not related to the need for HCFC in the local market, are expected to revert to their previous status in the near future, with a potential increase in the consumption of HCFCs. Verification report 4. An independent verification report on HCFC consumption for 2015 and 2016 confirmed that the Government has continued implementing its licensing and quota system for HCFC imports and exports and that the total consumption of HCFCs for 2015 and 2016 was and ODP tonnes, respectively. The verification also concluded inter alia that Argentina had maintained an exhaustive 1 As per the letter of 29 May 2017 from the Ministry of Foreign Affairs of Argentina to UNIDO. 3

4 control over the level of production and import of HCFCs during 2015 and 2016 allowing consumption for these years to continue declining, that its annual consumption of HCFCs was well below the maximum consumption limit allowed for the country, that its legal system was structured in such a way that it allowed the compliance with the Montreal Protocol targets. Country programme (CP) implementation report 5. The Government of Argentina reported data on HCFC use by sector under the 2016 CP implementation report ( ODP tonnes) that is higher than the consumption data provided in the verification report (228.9 ODP tonnes). As in other years, this is due to the fact that the consuming sectors used stockpiled substances imported in previous years. Progress report on the implementation of the second tranche of the HPMP Legal framework 6. The web-based import-export licensing and quota system continues to operate efficiently. Ninety per cent of the import quota is allocated to importers based on historical imports, four per cent is used for other enterprises, one per cent is retained for extraordinary cases, and five per cent is used for cases of occasional imports with weights slightly higher than those set in the licenses. 7. The import and export licensing system was strengthened to cover monitoring of HCFC-22 production by Frío Industrias Argentinas SA (FIASA), the only Argentinian HCFC producer, starting 1 January Monitoring has taken place for the year 2015 and the first three quarters of 2016, including review of stocks (i.e., raw material and final product), production, delivery of final product and related services (i.e., maintenance, control room and laboratory). The consolidated 2015 monitoring report concluded that 2, mt of HCFC-22 were produced (66 per cent of the 3, mt allowed); FIASA provided all information requested and all their records were found to be reliable; and HFC-23 originated as a by-product during the production of HCFC-22 is being emitted to the atmosphere. 8. Other regulations promulgated during stage I include a ban on import and production of room air-conditioning (AC) equipment using HCFC-22 by 1 January 2013 and incorporation of information on import of room AC units in the ODS licensing system. The Kigali Amendment to the Montreal Protocol will be ratified through the corresponding law to be enacted in 2018 or Manufacturing sector 9. Conversion of HCFC-22 in room and unitary AC equipment (53.5 ODP tonnes): Out of nine enterprises included in the project, seven were converted to HFC-410A as per the approved project, and two stopped producing HCFC-22-based equipment due to economic difficulties and did not convert. A total balance of US $500,636 associated with these two enterprises is being returned at the 79 th meeting 2. Since 2013 no HCFC is being used in the sector and imports and sales of HCFC-22-based AC equipment have been banned. 10. Conversion from HCFC-141b in the manufacture of polyurethane (PU) rigid insulation foam for domestic refrigerators at Mabe (18.46 ODP tonnes): The project was operationally completed in April Decision 77/17(b) requested UNIDO and the Government of Italy to return to the 79 th meeting the balance of US $547,973, consisting of US $322,644, plus agency support costs of US $24,198 for UNIDO (ARG/REF/61/INV/164), and US $177,992, plus agency supports costs of US $23,139 for the Government of Italy (ARG/REF/61/INV/163). 4

5 Refrigeration servicing sector 11. A total of 28 trainers and 850 refrigeration technicians have received training on good servicing practices in refrigeration and alternatives to HCFCs; and 1,184 technicians have received training on specific related topics (e.g., refrigeration systems in supermarkets, handling of hydrocarbons (HC) and other alternative refrigerants). Twelve training kits (comprising R-410A equipment, nitrogen cylinders and tools) have been distributed to training centers and 694 out of the 714 tool kits procured (comprising vacuum pumps, leak detectors, R-410A manifold and hoses and manual tools) have been distributed to refrigeration workshops. 12. Training courses on the phase-out of HCFC-141b used as flushing agent by refrigeration servicing technicians started in The training will be complemented by a demonstration activity to verify the efficiency of newly developed flushing equipment using a special grade of high-performance HFO-1233zd. A total of 20 sets will be distributed among beneficiaries, which will report on the performance of the equipment after a certain time of usage so that the lessons learnt can be disseminated. Monitoring of HCFC-22 production 13. Monitoring of HCFC production has been carried out through quarterly control visits and the production of reports since Project implementation and monitoring unit (PMU) 14. Awareness-raising activities implemented include a regional conference on the phase-out of HCFCs in the commercial refrigeration sector for 200 installers, equipment suppliers and supermarket chains from eight countries, and the preparation and distribution to refrigeration technicians of 11 brochures on: good practices in refrigeration; Montreal Protocol control measures; recovery, recycling and reclamation; safe servicing of HC-based equipment; alternatives to HCFCs; and commercial refrigeration in supermarkets. Level of fund disbursement 15. As of May 2017, of the US $10,949,518 so far approved, US $10,576,862 had been disbursed (US $9,738,250 for UNIDO and US $838,612 for the World Bank) as shown in Table 2. The balance of US $372,656 will be disbursed in 2017 and Table 2. Financial report of stage I of the HPMP for Argentina (US $) Agency First tranche Second tranche Total Approved Disbursed Approved Disbursed Approved Disbursed UNIDO (balance of the 800, , , ,000 NPP)* UNIDO 685, , ,612 74,320 1,000, ,344 World Bank 914, , , ,612 Subtotal 2,400,000 2,267, ,612 74,320 2,714,612 2,341,956 Disbursement rate (%) Project on domestic AC 8,234,906 8,234, ,234,906 8,234,906 manufacturing sector (Italy/UNIDO)** Total 10,634,906 10,502, ,612 74,320 10,949,518 10,576,862 Disbursement rate (%) *Balance from the national phase-out plan relocated for activities in the servicing sector as per decision 66/42(h). **Investment project approved at the 61 st meeting and subsumed in the HPMP, at US $8,735,542. Balance of US $500,636 plus agency support costs of US $47,337 is being returned to the 79 th meeting (decision 77/17). 5

6 Implementation plan for the third tranche of the HPMP 16. The following activities will be implemented between August 2017 and December 2018: (a) (b) Refrigeration servicing sector (UNIDO) (US $110,000): Continuation of technical assistance to reduce the use of HCFC-141b in flushing during servicing including the demonstration of using HFO-1233zd in flushing equipment; continuation of the training of trainers on natural alternatives to HCFCs through six training sessions and a technical and economic study on the introduction of new alternatives; two additional workshops for the commercial refrigeration sector; and continuation of activities to facilitate the introduction of CO 2 and HC refrigerants, including workshops on the availability and advantages or disadvantages of such alternatives, and promotion of these alternatives in Argentina in cooperation with technology providers from countries where such alternatives are currently being produced and used; and Project coordination and monitoring strategy (UNIDO)(US $15,000): Continuation of monitoring of the production, imports and exports of HCFCs, the consumption in the different sectors, implementation of overarching strategy, and coordination of all activities related to the third tranche of the HPMP. SECRETARIAT S COMMENTS AND RECOMMENDATION COMMENTS Progress report on the implementation of the second tranche of the HPMP Legal framework 17. The Government of Argentina has already issued HCFC import quotas for 2017, at ODP tonnes, which is lower than the consumption levels allowed under the Montreal Protocol and lower than the expected HCFC consumption for the year as Argentina also produces HCFC-22. Refrigeration servicing sector 18. The Secretariat noted that the target of 2,000 technicians to be trained in stage I was surpassed and additional technicians will continue to be trained in 2017 and With regard to customs training, UNIDO confirmed that the ten workshops for 206 officers in seven cities included in the last report was the final target for the stage I of the HPMP. 19. On the availability of alternatives to HCFC, UNIDO referred to the results of the ODS alternatives surveys, which provided a comprehensive overview of alternatives in the local market. According to the survey, the main barriers to a more widespread use of HC and CO 2 in commercial refrigeration appliances were the cost of conversion due to safety requirements (HC), increased capital costs, and the need for technicians with better skills (CO 2 ). Ammonia/CO 2 systems are considered a possible option in industrial refrigeration to reduce the charge of ammonia and decrease toxicity risk. A Multilateral Fund project to demonstrate trans-critical CO 2 is currently being implemented. The new synthetic low-gwp refrigerants are not yet commercially available in Argentina. Plan of action for the final tranche and date of completion of stage I 20. The Government of Argentina has confirmed through UNIDO that the date of completion of stage I continues to be 31 December 2018, as per paragraph 14 of the Agreement between the 6

7 Government and the Executive Committee. Stage II of the HPMP has been submitted for consideration to the 79 th meeting. Conclusion 21. The Government of Argentina continued implementing its HCFC import and export licensing and quota system. The HCFC consumption levels in 2015 and 2016 were below the 10 per cent control measure in 2015 as corroborated by the independent verification reports. The level of HCFC-22 production is also in compliance with the established target for 2015 as indicated in the HCFC-22 production monitoring report. The country completed the conversion of the room AC manufacturing sector, phasing out 53.5 ODP tonnes of HCFC-22 and the conversion of one PU foam manufacturing enterprise, phasing out ODP tonnes of HCFC-141b, and continued the implementation of activities in the refrigeration servicing sector, with an emphasis on technician training. UNIDO, the World Bank and the Government of Italy have disbursed 96.6 per cent of the approved funds. RECOMMENDATION 22. The Fund Secretariat recommends that the Executive Committee: (a) (b) Takes note of the progress report on the implementation of the second tranche of stage I of the HCFC phase-out management plan of (HPMP) for Argentina; and Requests the Government of Argentina, UNIDO and the World Bank to submit the project completion report to the second meeting of the Executive Committee in The Fund Secretariat further recommends blanket approval of the third and final tranche of stage I of the HPMP for Argentina, and the corresponding tranche implementation plan, at the funding level shown in the table below: (a) Project title HCFC phase-out management plan (stage I, third and final tranche) Project funding Support cost Implementing (US $) (US $) agency 125,000 8,750 UNIDO 7

8 PROJECT EVALUATION SHEET MULTI-YEAR PROJECTS Argentina (I) PROJECT TITLE HCFC phase-out plan (Stage II) AGENCY UNIDO (lead)/world Bank/Italy (II) LATEST ARTICLE 7 DATA (Annex C Group l) Year: (ODP tonnes) (III) LATEST COUNTRY PROGRAMME SECTORAL DATA (ODP tonnes) Year: 2016 Chemical Aerosol Foam Fire fighting Refrigeration Solvent Process agent Manufacturing Servicing Lab use Total sector consumption HCFC HCFC HCFC HCFC-141b HCFC-141b in Imported Preblended Polyol HCFC-142b (IV) CONSUMPTION DATA (ODP tonnes) baseline: Starting point for sustained aggregate reductions: CONSUMPTION ELIGIBLE FOR FUNDING (ODP tonnes) Already approved: Remaining: (V) BUSINESS PLAN After 2020 Total UNIDO ODS phase-out (ODP tonnes) Funding (US $) 1,068, ,401, ,000 3,403,000 World Bank ODS phase-out (ODP tonnes) ,17 Funding (US $) 823,000 2,432,000 2,432,000 1,627, ,000 8,137,000 Government ODS phase-out (ODP tonnes) of Italy Funding (US $) (VI) PROJECT DATA Total Montreal Protocol consumption limits n/a Maximum allowable consumption (ODP tonnes) n/a Project costs requested in principle (US$) UNIDO Project costs 595, ,347, ,334, ,107 3,641,070 World Bank Support costs 41, , ,380 25, ,875 Project costs 907, ,722, ,815, ,017 6,050,168 Support costs 63, , ,054 42, ,512 Italy Project costs 250, ,000 Support costs 32, ,500 Total project costs requested in principle (US $) 1,753, ,069, ,149, ,124 9,941,238 Total support costs requested in principle (US $) 137, , ,434 67, ,887 Total funds requested in principle (US $) 1,891, ,354, ,369,484 1,036,962 10,652,125 (VII) Request for funding for the first tranche (2017) Agency Funds requested (US $) Support costs (US $) UNIDO 595,746 41,702 World Bank 907,525 63,527 Italy 250,000 32,500 Funding request: Secretariat's recommendation: Approval of funding for the first tranche (2017) as indicated above For individual consideration 8

9 PROJECT DESCRIPTION 24. On behalf of the Government of Argentina, UNIDO as the lead implementing agency, has submitted to the 79 th meeting stage II of the HCFC phase-out management plan (HPMP) at the total cost of US $12,824,415 3, consisting of US $4,015,070, plus agency support costs of US $281,055 for UNIDO, and US $7,970,365, plus agency support costs of US $557,926 for the World Bank, as originally submitted 4. The implementation of stage II of the HPMP will phase out ODP tonnes of HCFCs to meet 48 per cent reduction in HCFC consumption by 2022, as originally submitted. 25. The first tranche for stage II of the HPMP being requested at this meeting amounts to US $4,944,198, consisting of US $1,435,000, plus agency support costs of US $100,450 for UNIDO, and US $3,185,746, plus agency support costs of US $223,002 for the World Bank, as originally submitted. Status of implementation of stage I of the HPMP 26. The progress on implementation of stage I of the HPMP for Argentina, including the status of funds disbursement, is presented in paragraphs 1 to 23 above. Stage II of the HPMP Remaining eligible consumption in Argentina 27. After deducting ODP tonnes of HCFCs associated with stage I of the HPMP and ODP tonnes 5 proposed for stage II, the remaining consumption of HCFCs eligible for funding amounts to ODP tonnes, as shown in Table 1. Table 1: Overview of the remaining HCFC consumption eligible for funding (ODP tonnes) HCFC Starting Reduction in Remaining Reduction in Remaining point stage-i consumption stage II consumption HCFC HCFC HCFC HCFC-141b* HCFC-142b Total (ODP tonnes) *Additional non-eligible 9.82 ODP tonnes of HCFC-141b beyond the starting point are also being phased out. HCFC consumption and sector distribution 28. The HCFC consumption is shown in Table 1 of stage I of the HPMP. Table 2 presents the distribution of HCFC use among sectors as reported in the country programme (CP) data for This figure does not include an additional project for US $222,048 to phase out 1.19 ODP tonnes of HCFCs in the XPS foam sector added during the project review process. 4 As per the letter of 20 April 2017 from the Ministry of External Relations of Argentina to the Secretariat. 5 A larger tonnage of HCFC will be phased out, but only ODP tonnes are deducted from the remaining eligible consumption. The reason for this is that ODP tonnes of HCFC-141b will be phased out but there are only ODP tonnes in the remaining eligible consumption to be deducted. 9

10 Table 2. Distribution of HCFC use by sector and substance (2016) Substance Aerosol Foam Fire Fighting Solvent Refrigeration Manufacturing Total Manufacturing Servicing Total Percentage (%) Metric tonnes (mt) HCFC , , HCFC-141b HCFC-141b in imported preblended polyol HCFC-142b HCFC HCFC Total (mt) , , , Total (%) n/a ODP tonnes 0 HCFC HCFC-141b HCFC-141b in imported preblended polyol HCFC-142b HCFC HCFC Total (ODP tonnes) Total (%) n/a 29. The refrigeration servicing sector is the largest HCFC-consuming sector in Argentina (61 per cent in ODP tonnes). It also consumes more than 90 per cent of the HCFC-22 in the country. In 2016, the manufacturing sectors only represented 38.9 per cent of the HCFC consumption; with 34.3 per cent in the foam sector (i.e per cent in PU foam and one per cent in XPS foam) and 4.6 per cent in the refrigeration manufacturing, aerosol and fire-fighting sectors. HCFC consumption in manufacturing sectors Foam manufacturing sector 30. HCFC-141b continues to be used by more than 200 small and medium-sized enterprises (SMEs) in the manufacturing of rigid PU foam applications, with a small amount used in flexible moulded and integral skin. In addition, small quantities of HCFC-22 and HCFC-142b are used in the manufacturing of XPS insulation boards. Details of the HCFC consumption by foam application are shown in Table 3 below. 10

11 Table 3. Estimated distribution of HCFC use in PU and XPS foam applications (2015) Application Consumption (mt) Percentage HCFC-141b HCFC-22 HCFC-142b Total (%) PU foam Domestic refrigeration Commercial refrigeration Continuous and discontinuous panels Pipe and tank insulation Spray Pour in place Doors filling Block Flex-moulded Blinds, thermoware, floating XPS foam Insulation boards Total The PU foam manufacturers procure HCFC-141b mostly in pre-blended form from systems houses and importers (i.e., Alkanos, BASF, Dow, Ecopur, Huntsman, Poliresinas San Luis and Química del Caucho). Table 4 shows HCFC consumption in 2015 for each systems house and the number of downstream users. Table 4. Consumption of HCFC-141b by systems houses and their downstream users in Argentina System house Characteristics Number of downstream users 2015 HCFC consumption, (kg) Alkanos Local systems house 16 96,021 BASF Non-Article 5 systems house with local facilities ,211 Dow Non-Article 5 systems house with local facilities ,052 Ecopur Importer of formulated polyols. Local addition of blowing 42 47,847 agent Huntsman Importer of PU systems (fully formulated polyol and MDI) ,796 Poliresinas San Luis Local systems house 16 28,442 Química del Caucho Importer of PU systems (fully formulated polyol and MDI) 35 89,568 Total 206* 663,937 *Four have consumption above 20 mt, 16 have consumption between 10 mt and 20 mt, 99 have consumption between 1 and 10 mt and the remaining 87 have consumption below one mt. Out of the 206 downstream users identified, 160 were considered eligible for funding. Refrigeration and AC manufacturing sector 32. Commercial and industrial refrigeration manufacturing: Total consumption of HCFC-22 in this sector is around 165 mt, out of which 93 mt were charged at the manufacturing site, while the rest was charged in the location where the system is installed. The sector is composed mainly of locally owned SMEs (around 63), most of which manufacture products for both subsectors and consume less than 2 mt per year. Around 12 enterprises produce water coolers and dispensers, and seven medium sized enterprises and several SMEs manufacture condensing units and can be considered part of the installation and assembly subsector, as the refrigerant is used for first charge in the end-user s location. 6 Including 24 downstream users with consumption > 100 kg through Alisa, a BASF distributor. 7 Including 6 downstream users with consumption > 100 kg through Polytal S.R.L. and Polycoat, Dow distributors. 11

12 33. HCFC-22, R-404A and R-407C are the most common refrigerants used for condensing units, and small amounts of CO 2 are used in two supermarket systems. In the industrial refrigeration subsector 95 per cent of the refrigerant is ammonia, used by around 3,000 food processing enterprises in 10,000 to 15,000 installations (e.g., freezing lines, cheese and ice cream factories and ice production). 34. Air-conditioning (AC) manufacturing: The use of HCFC-22 in the domestic AC sector was phased out in stage I of the HPMP. The main refrigerant used in this sector is R-410A followed by small amounts of R-407C. No HCFC is used in the mobile AC manufacturing sector, where the main refrigerant used is HFC-134a. There are 12 importers and/or manufacturers of chillers. A total of 92 mt of HCFC-22 and 135 mt of HCFC-123 are currently installed in around 2,000 chillers, with HCFC consumption below 2 mt/year for servicing. An additional 3,000 chillers were identified using HFCs and 200 using ammonia. Although there are around 20 absorption chillers installed in the country, technicians are not qualified yet to service this type of technology. Aerosol sector 35. Most aerosol products in Argentina have been produced with HCs as propellant since 1992, when national regulations banned the use of ODS, except for metered-dose inhalers (MDIs) and those used in the electronic subsector. Around five per cent of the aerosol production uses HCFCs due to non-flammability requirements. Sixteen enterprises use HCFC to manufacture party aerosols, contact cleaners, lubricants, insulators, dust blowers, and cold pain-relief products. 36. HCFC-22, HCFC-141b and HCFC-142b are used as active ingredients in cleaning applications for dissolving other active ingredients (e.g. lubricants, insulators, adhesives), and HCFC-22 is also used as propellant. A blend of HCFC-22, butane and di-methyl ether (DME) is used for artificial snow. HCFC-22 and HCFC-141b are used in electronic contact cleaners, lubricants and insulators. Blowers (particle removers) consist of pure HCFC-22 and cold pain-relief aerosol dispenses HCFC-141b with about 10 per cent of HCFC-22 as propellant. Since 2014, HCFC consumption has been replaced by HFC-134a due to an increase in HCFC prices. Fire extinguisher sector 37. There are four fire-extinguisher manufacturers and 42 enterprises that offer servicing and recharging of fire extinguishers. HCFC-123 and small amounts of HCFC-141b are used in this sector. The technically most suitable replacement for halon-1211 in portable fire extinguishers would be HFC-236fa. However, because of the very high price of this product, as well as its very high GWP (6,300), there are several HCFC-123-based products in the market. HCFC consumption in the refrigeration servicing sector 38. According to the survey performed on 2,658 service workshops, there are close to 11,000 refrigeration technicians working for approximately 6,000 to 6,500 service workshops. 39. Standard service workshops are small, managed by their owners and composed of one to two technicians with academic qualifications. It is also estimated that 80 to 85 per cent of the workshops are formally constituted. Technicians provide service to a wide range of refrigeration appliances and equipment (e.g. domestic, commercial, industrial, and mobile AC). Around 50 per cent of service workshops have equipment provided under the national CFC phase-out plan and the HPMP. In addition, a total of 10,930 technicians received training and 3,636 received tools under these plans. Under the recovery, recycling and reclamation programme implemented in Argentina, a total of 122 mt of HCFC-22 have been recovered, 105 mt have been reused and 4.4 mt have been reclaimed. 12

13 40. HCFC-22 represents 55 per cent of the refrigerants used in the servicing sector, followed by HFC-134a (20 per cent) and R-410A (6 per cent). An estimation of the demand for HCFC-22 in the refrigeration servicing sector is presented in Table 5. Table 5. Estimation of demand for HCFC-22 in the refrigeration servicing sector (2015) Application HCFC-22 based Refrigerant charge Number of top-up Top-up amount Service demand units mt ODP tonnes repairs (kg/unit) mt ODP tonnes Air-conditioning 8,500,000 90,000 4,950 2,100, , Commercial and industrial refrigeration 1,250,000 5, , Total 9,750,000 95,250 5,239 2,300,000 2, Due to the recent opening of a large number of small food retailers in major cities, the sale of commercial refrigeration systems has increased and is expected to continue growing 3.5 to 5 per cent up to Proposed activities in stage II of the HPMP 42. The activities to be implemented during stage II include the total phase-out of HCFCs in the PU and XPS foam manufacturing sectors, assistance to the refrigeration servicing sector and monitoring of HCFC-22 production. Activities in the manufacturing sector PU foam manufacturing sector 43. Stage II includes the complete phase-out of mt (80.43 ODP tonnes) of HCFC-141b used in the PU foam manufacturing sector by 1 January 2022 through: (a) (b) (c) (d) The conversion of the two PU foam enterprises (Friostar and Argenpur) to cyclopentane for rigid PU and block, and to HFO reduced with water for spray foam, with the phase-out of mt (7.40 ODP tonnes) of HCFC-141b; Seven umbrella projects implemented through seven systems houses and distributors to convert 160 eligible SMEs to reduced HFO formulations, with the phase-out mt (59.96 ODP tonnes) of HCFC-141b; Additional assistance under the systems houses project to address the phase-out of the remaining consumption of mt (3.26 ODP tonnes) in the starting point, consumed by non-identified enterprises; and A ban on the import of HCFC-141b, pure and pre-blended in formulated polyols to enter into force on 1 January While conversions are expected to take place by 2020, the additional time was determined given the current uncertainty of the HFO market situation over the next 5-year period, and to allow for contingencies in converting SMEs. 44. Incremental capital cost (ICC) for the conversion of Friostar and Argenpur (blocks) to cyclopentane includes HC storage and blending items (US $20,000 to US $89,000); retrofit of foam dispensers (US $145,000) and a high-pressure foam dispenser (US $180,000); plant safety for ventilation, electrical heating modification, gas sensors, fire protection system, lightning protection and grounding, antistatic floor and safety audit (US $89,000 and US $209,000); and trials and commissioning (US $45,000 to US $50,000). The ICC for the conversion of Argenpur (spray) to HFO includes cooling 13

14 system for HFO based formulations (US $5,000) and technical assistance, trials and testing (US $15,000). Contingencies were calculated at 10 per cent of the capital cost for individual conversions. 45. The ICC for the two local systems houses include support to develop foam formulations (US 30,000 each), thermal conductivity tester (US $35,000), and cooling systems for blending tanks (US $15,000). An additional US $1,000 per downstream user is included for project management. At the downstream user level, ICC includes cooling system for HFO based formulations (US $5,000); testing and trials (US $15,000/enterprise for consumption above 10 mt, US $10,000/enterprise for consumption between 10 and one mt, US $3,000/enterprise for consumption between one mt and 500 kg, and US $1,300/enterprise for consumption between 500 kg and 100 kg). Contingencies are calculated at 10 per cent of the capital cost. 46. IOCs are estimated at between US $0.36 and US $0.40/kg for cyclopentane, and US $10.56 for reduced HFO formulations. For non-smes, funds requested for IOCs are equal to or below US $5.00/kg. 47. In addition US $324,874 is being requested under the systems houses project to address the phase-out of the remaining consumption of mt (3.26 ODP tonnes) in the starting point, consumed by non-identified enterprises based on the cost-effectiveness threshold of US $10.96/kg. XPS foam manufacturing sector 48. Stage II also includes the conversion of two XPS foam manufacturing enterprises (Celpack 8 and Perfiles Revestidos 9 ) to CO 2 and ethanol. The project will phase out mt (3.42 ODP tonnes of HCFC-22 (30.52 mt or 1.68 ODP tonnes) and HCFC-142b (26.77 mt or 1.74 ODP tonnes). 49. The ICC for the conversion of Celpack includes CO 2 and ethanol/dme storage tanks (US $111,000); new extrusion line (US $381,500); safety-related equipment (US $127,500); training, technical assistance, trials, testing and safety audit (US $75,000); and contingencies (10 per cent of the capital cost). Incremental operational savings amount to US $54,725. The total incremental cost of the project is US $709,775. Applying the cost-effectiveness threshold for XPS foam (US $10.28/kg), a total of US $366,715 is being requested from the Fund; the remaining US $343,060 will be co-financed by the enterprise. 50. The ICC for the conversion of Perfiles Revestidos includes CO 2 and ethanol/dme storage tanks (US $111,000); new extrusion line (US $656,500); safety-related equipment (US $62,500); training, technical assistance, trials, testing and safety audit (US $65,000), and contingencies (10 per cent of the capital cost). Incremental operational savings amount to US $139,000. The total incremental cost of the project is US $845,500. Applying the cost-effectiveness threshold for XPS foam (US $10.28/kg), a total of US $222,048 is being requested from the Fund; the remaining US $623,452 will be co-financed by the enterprise. 51. The total cost of the PU foam sector plan and the XPS foam investment project is presented in Table 6. 8 Original submission included a proposal to convert Celpack to butane for US $366,715 (incremental cost US $1,170,656). Upon the enterprise s request, during the project review process the original proposal was replaced with a revised proposal to convert to CO 2 /ethanol. 9 Original submission did not include the project for Perfiles Revestidos; it was incorporated during the project review process in order to address all the eligible HCFC consumption in the XPS foam sector. 14

15 Table 6. Total cost for the conversion of the PU and XPS foam sectors Project Enter HCFC consumption Incremental cost (US $) Funds prises mt ODP ICC IOC Total request tonnes (US $) Individual projects PU foam Friostar ,400 14, , , Argenpur ,300 42, , , Subtotal individual ,700 56, , , Systems houses (SH) Alkanos ,160 1,014,004 1,363,164 1,052, BASF ,710 1,236,131 1,666,841 1,549, Dow , , , , Ecopur , , , , Huntsman ,730 1,124,294 1,587,024 1,302, P. San Luis , , , , Q. del Caucho , ,564 1,034, , Assistance remaining * , consumption Subtotal SH ,271,390 5,270,850 7,542,240 6,197, Subtotal PU foam ,203,090 5,327,179 8,530,269 6,855, XPS foam Celpack ,500 (54,725) 709, , Perfiles Revestidos** ,500 (139,000) 845, , Subtotal XPS foam ,749,000 (193,725) 1,555, , Total foam sector ,952,090 5,133,454 10,085,544 7,444, Additional noneligible consumption being phased out C.E. US $/kg * n/a n/a n/a n/a n/a *Unknown. **Project for Perfiles Revestidos was added during the project review process on 1 June Activities in the refrigeration servicing sector 52. Stage II of the HPMP also proposes to phase out mt (41.16 ODP tonnes) of HCFC-22 used in the refrigeration servicing sector with a total cost of US $3,591,070 (calculated at US $4.80/kg). An overview of activities to be implemented in this sector is summarized below: (a) (b) Training and equipment for technicians in the AC and commercial refrigeration servicing sector (US $2,624,070): This includes development of training courses; update of technicians training manuals; development of a guide on energy efficiency and good practices; distribution of equipment to 12 training centres and 1,000 service kits among trained technicians (i.e., HC manifolds, HC leak detectors, charging scale and HC tank stand, vacuum pump, evacuation hose, hand tools and HC cans; flushing equipment); and training of 15 trainers and 4,000 technicians on inter-alia best practices working with emerging alternatives (HC, ammonia, CO 2 ), appropriate cleaning and flushing techniques, recovery and management of HCFC and HFC refrigerants, available and emerging alternatives to HCFC and HFC refrigerants, and impact of installation and good service practices on energy efficiency of systems; Certification of technicians in the handling and use of flammable refrigerants (US $396,000): This includes the development of a refrigeration technician certification scheme for handling flammable refrigerants; the establishment of provincial certification bodies; the development of an e-learning scheme for technicians; and certification to technicians that have successfully completed the theoretical and practical examination. The certification scheme will have capacity to certify 1,000 technicians per year; and 15

16 (c) Technical assistance (TA) to reduce refrigerant leaks in supermarkets (US $471,000): This component proposes expert advice for 40 supermarkets comprising an induction workshop; system diagnostic visits to review the condition of the refrigeration/ac systems and provide recommendations on ways to reduce leakages; follow-up visits for a year to monitor implementation of recommendations and action plan proposed by the expert; a report containing major findings from the monitoring of the refrigeration/ac systems, including cost and financial/environment benefits of applying the leakage reduction recommendations; a workshop for supermarket managers to report and demonstrate experience collected and recommendations; and dissemination of information to other supermarkets; (d) Public awareness activities 10 (US $100,000): It includes activities to increase consumer s awareness on HCFC-free products (e.g., media campaign, dissemination material, press conferences, participation in specialized exhibitions). Policy measures, project implementation and monitoring unit (PMU) and monitoring of HCFC production 53. The following non-investment activities are proposed to support and ensure sustainability of the HCFC phase-out projects: public awareness (already described under servicing); improvement of the quota and licensing system; standards, bans and policy control; coordination and monitoring of the HPMP (US $424,000); and a project monitoring and implementation unit for the implementation of the foam sector projects (US $672,180). 54. In addition, US $76,000 are requested to continue monitoring yearly domestic HCFC production and stockpiles including verification visits by experts; strengthening of the management information system to track domestic sales and monitor the movement of stockpiles; and production of quarter reports (as done during stage I). Total cost of stage II of the HPMP 55. The total cost of stage II of the HPMP for Argentina to be funded has been estimated at US $12,207,484, as originally submitted (excluding support costs). The proposed activities will result in the phase-out of ODP tonnes of HCFCs representing 28.7 per cent of the HCFC baseline, with an cost-effectiveness of US $8.43/kg, as summarized in Table 7. Table 7. Total cost of stage II of the HPMP for Argentina Activity Agency HCFC phase-out Total cost (mt) (ODP tonnes) (US $) CE (US $/kg) Subtotal individual projects PU foam , Subtotal systems houses PU foam ,197, World Bank Subtotal XPS foam , Sub-total PU and XPS foam ,444, Training and equipment for technicians ,624, Technicians certification , TA for supermarkets UNIDO , Public awareness , Subtotal servicing ,591, Monitoring of HCFC-22 production World Bank ,000 0 PMU World Bank ,180 0 UNIDO ,000 0 Total 1, ,207, This component, originally submitted as part of the PMU, has been grouped with the activities in the servicing sector submitted at a cost-effectiveness of US $4.80/kg. The PMU is addressed separately. 16

17 Activity Agency HCFC phase-out Total cost (mt) (ODP tonnes) (US $) CE (US $/kg) Additional non-eligible tonnage to be phased out in the PU foam sector Total HCFC phase out in stage II 1, Total UNIDO 4,015,070 Total World Bank 8,192,414 Activities planned for the first tranche 56. The first funding tranche of stage II of the HPMP at the total amount of US $4,620,746 will be implemented until December 2019, and will include: initiation of the conversion of individual projects and systems house projects in the PU and XPS foam sectors (US $2,888,874); provision of part of the equipment kits for refrigeration and continuation of the training of technicians on good servicing practices (US $900,000); initiation of the technicians certification programme (US $150,000); start of the technical assistance project to reduce refrigerant leaks in supermarkets (US $200,000); monitoring of HCFC-22 production for the years 2017 and 2018 (US $28,000); awareness activities (US $35,000); and monitoring and coordination (US $418,872 ). COMMENTS SECRETARIAT S COMMENTS AND RECOMMENDATION 57. The Secretariat reviewed stage II of the HPMP for Argentina in light of stage I, the policies and the guidelines of the Multilateral Fund, including the criteria for funding HCFC phase-out in the consumption sector for stage II of HPMPs (decision 74/50), and the business plan of the Multilateral Fund. Overarching strategy for stage II 58. Stage II, as submitted, proposed activities in the PU foam, XPS foam and refrigeration servicing sectors. Taking into consideration that with the PU foam sector plan alone (80.43 ODP tonnes) Argentina could achieve compliance with the next HCFC consumption target (35 per cent reduction from the baseline in 2020), the Secretariat requested justification for the remaining activities included in stage II. 59. UNIDO indicated that the Government s strategy to prioritize the phase-out in both the PU and XPS foam sectors is in line with existing policies aimed at phasing out first those HCFCs with higher ODP and in the manufacturing sectors. By addressing all eligible enterprises in the PU foam sector, the Government will be able to establish a ban on the import and use of HCFC-141b pure or contained in imported pre-blended polyols for the manufacture of PU foam by 1 January 2022, thus ensuring the phase-out of an additional 9.82 ODP tonnes of non-eligible consumption in the sector. The Government will also establish a ban on the import and use of HCFC-22 and HCFC-142b for the manufacture of XPS foam by 1 January In addition, the refrigeration servicing sector component is required to continue activities being implemented under stage I, and to achieve additional HCFC reductions. The economic situation and difficulties with imports in recent years slowed down the industry, market demand and consumption of HCFCs; however, as the economy is normalizing, it is expected that consumption will resume its growth in the absence of the proposed activities. Considering that 61 per cent of the HCFC consumption is in this sector, the impact of the activities implemented will have an impact in maintaining compliance with the Montreal Protocol. 17

18 Technical and cost issues related to the PU foam sector plan Enterprises included 61. During the project review process it was found that a total of 22 enterprises with an estimated consumption of mt (9.32 ODP tonnes) included for funding in the systems houses proposal were ineligible either because of the cut-off date or because they had already received funding in the past to convert to a final technology (i.e., cyclopentane, water, methylene chloride). On this basis, the tonnage and funding associated with these enterprises were removed from the systems house projects. It was also agreed to remove the requested assistance to address mt (3.26 ODP tonnes) associated with ineligible and very small enterprises not identified in the survey. 62. Given the difficulty of collecting data from very small enterprises at the preparatory stage, it was agreed, as for other similar projects assisting SMEs through system houses, that the World Bank would report at each tranche on the eligibility of enterprises receiving assistance, as they are incorporated into the implementation of the HPMP. The World Bank agreed to continue updating the list of enterprises, and ensuring that funding would only be provided to eligible enterprises and lines 11. Funding associated with enterprises found to be non-eligible for funding would be returned to the Fund. HCFC-141b consumption addressed by the PU foam sector plan 63. The level of HCFC-141b consumption identified in the PU foam sector ( mt or ODP tonnes) is larger than the remaining eligible consumption of HCFC-141b as per the stage I Agreement between the Government and the Executive Committee ( mt or ODP tonnes). However, as the aggregate consumption by all eligible enterprises identified in the projects is lower than the remaining eligible consumption, all of them can receive assistance. The remaining HCFC-141b consumption by ineligible enterprises will be deducted from the remaining eligible consumption. Table 8 shows the eligible and ineligible consumption in the sector as submitted and after project review. Table 8. HCFC-141b consumption addressed by the PU foam sector plan Activity As submitted After review Mt ODP tonnes mt ODP tonnes Eligible consumption Individual projects * Umbrella project ** Total eligible consumption Ineligible within starting point (can be deducted) Ineligible beyond starting point (cannot be deducted) Total HCFC-141b consumption in PU foam * One individual project (Argenpur spray) was moved to the systems houses projects **Includes the removal of 22 ineligible enterprises and the addition of one individual project (Argenpur spray) in the systems houses projects Second-stage conversions 64. The Secretariat identified 38 enterprises that had already received funding to convert from CFC-11 to HCFC-141b. In accordance with decision 74/50(b)(i), all eligible enterprises included in stage II are eligible for full funding of eligible incremental costs, as it has been clearly demonstrated that all of them are converting to low-gwp technologies. 11 Paragraph 7(c) of the template Agreement for stage II of the HPMP agreed at the 76 th meeting addresses this situation. 18